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Analysis of Porter's Model of Competition - Strategic Management

   

Added on  2020-01-07

13 Pages3845 Words184 Views
STRATEGICMANAGEMENT

Table of ContentsINTRODUCTION...........................................................................................................................3FINDINGS.......................................................................................................................................31) Overview and critical analysis of Porter's model of competition ..........................................32) Company analysis .................................................................................................................53 Does the theory and practice work? ........................................................................................8CONCLUSION .............................................................................................................................12RECOMMENDATIONS ..............................................................................................................12REFERENCES..............................................................................................................................13

INTRODUCTIONThe continuous planning, monitoring, analysis and examination of all which is essentialfor a business enterprise for reaching goals and objectives is referred as strategic management.The procedure of strategic management consists of analysis of cross-functional businessdecisions preceding to their execution (Jurevicius, 2013). Strategic management gives a wholedirection to the business organisations and includes specifying the objectives of business,development of policies and plans formulated for accomplishing these objectives and thenallocation of resources for executing plans (Freeman, 2010). The present report is based uponstrategic analysis of Asda. It is a British supermarket retail firm offering products and servicessuch as grocery, general merchandise, financial services etc. and around 180,000 employeeswork in this company. Apart from its key supermarket retail business, it also provides severalother products such as financial services, mobile phones. The company has opened new stores inseveral areas recently. FINDINGS1) Overview and critical analysis of Porter's model of competition The Porter's Five Forces model is a simple yet strong tool to understand where does thepower stands in a business situation. This model is taken in use for understanding strength of afirm's competitive position as well as strength of a position it desires to move into (Hill Jonesand Schilling, 2014). By clearly understanding where does the power stands, companies can takefair benefits of a situation of strength, make improvements in the weak situation and avoid takingwrong decisions. Traditionally the tool is taken in use for identifying if new products, services orbusinesses have the capability of being profitable. The model assumes that there are fiveessential variables which determine competitive power in a business situation (E. Dobbs, 2014).These forces are:Supplier power: In this it is assessed how simple it is for suppliers to take the prices up.It is affected by number of suppliers of every key input, the individuality of theirofferings, their strength and control over a firm etc. Buyer power: Buyers are the customers who consumes the products or the firms thatdistribute the products of industry to the end users. Their bargaining power means the

potential of customers to bargain down the prices being taken by organisations in anindustry (Rothaermel, 2015).Competitive rivalry: Rivalry means the competitive struggle for share in market betweenbusiness organisations in a industry. Intense rivalry among leading enterprises gives apowerful threat for profitability of firms. Threat of substitution: Substitute products creates an upper limit on the potential returnsin an industry by making a set limitation on the prices which firms take for their productsin the industry. Threats of new entrants: The entry of of new firms increases the capacity of industry,starts a competition for share in market and lessens the current costs (Magretta, 2013).The threats on potential competitors is partly a function of extension of the hurdles toentry.The models is a classic strategic business technique for analysing the industrycompetition, for assessment of growth capabilities and environmental affects. But, because theindustries are ever-changing and the characteristics of businesses regularly evolve, somequestions arise if this tool is still relevant and dependable. The criticism is based on the fact thatthe model is incomplete as its shows that the multi level nature of several industries can impactthe accuracy of the analysis. The major weakness of the tool is from the historical perspective inwhich it was propounded (Hemmatfar Salehi and Bayat, 2010). Also the dynamic features ofindustries is one of the implicit factor which can cause uncertainness regarding theappropriateness of this model. This model is applicable to analyse simple market structures. Incomplicated industries having several interconnections, products range, semi-products andsegments it is difficult to have a comprehensive and descriptive analysis. It has a very narrowfocus towards specific segments of such industries which involves a risk of losing essentialcomponents. Apart from this, this tool assumes relatively static structures of market. This doesnot fits in today's market structures (O'Cass and Weerawardena, 2010). The advancements intechnologies, dynamic market entries from start ups or other industries can completely transformthe models, entry hurdles and relations along the supply chain in short duration. The five forcesmodel hardly offer much meaningful suggestions for preventive measures. Along with thesecritical views, the model relies on the concept of competition. It presume that business firms tryto get competitive advantages over other firms in the market and the suppliers or buyers. With

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